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  (Source: BBC News)
Lazaridis is joined by Doug Fregin, another co-founder; together they control almost a quarter of BB

Could one of the men who drove BlackBerry Ltd. (TSE:BB) from the top of the smartphone market down to its current position near the bottom of the smartphone heap seize full ownership of the company?  It sounds like a bad plan, but it just could happen.

I. Early Bidding Ensues

After a $1B USD loss, BB's slow creep towards market irrelevance became a fast dash towards insolvency.  Prior to that lost top shareholders had agreed to CEO Thorsten Heins' plan to adopt a wait-and-see outlook about BlackBerry 10 and resist a sale.  But after waiting and witnessing yet another BlackBerry blunder, they had seen enough and effectively voted no confidence expressing openness to a sale.

Given BB's wealth of intellectual property, faint hope of device resurgence (under the proper management), and relatively strong engineering base (despite layoffs) coupled with low share prices (1/28th their 2008 value) it didn't take long for predatory troubled assets firms to emerge looking to scoop up BB as either a ticket onto the smartphone market and/or an auction block item.

Cerberus
Cerberus, whose NYC headquarters is seen here, is exploring a bid for BB. [Image Source: AFP]

Three days after the earnings report, billionaire Prem Watsa -- who currently holds approximately 10 percent of BB shares -- made a buyout bid of $4.7B USD via his company Fairfax Financial Holdings Ltd. (TSE:FFH).  Days later, filings revealed that Cerberus Capital Management, L.P., a hedge fund specializing in distressed assets, was also exploring a bid.

II. Lazaridis Has Risen

Now the latest bidder has emerged.  Confirming earlier rumors, Mike Lazaridis -- who served as co-CEO and co-chairman of the board with Jim Balsillie during both BB's boom years and its shocking fall -- and Doug Fregin -- another BB cofounder -- have filed a declaratory form with the U.S. Securities and Exchange Commission (SEC).

Doug Fregin and Mike Lazaridis
Doug Fregin (left) and Mike Lazaridis (right), cofounders of RIM/BB are making a bid for their former company. [Image Source: Quantum Valley Investments]

The form says that Mr. Lazaridis and Mr. Fregin both directly own about 41 million of the remaining shares -- an 8 percent stake in BB worth over $350M USD.  Meanwhile, Mr. Lazaridis controls (so is at least the majority stakeholder) five holding companies bearing the name Ontario, Ltd. and one holding company named Ontario, Inc.  These companies control 4.0, 0.1, 0.8, 2.3, 7.8, and 0.6 percent of shares, respectively.  Thus it appears that Mr. Lazaridis owns directly or controls 23.6 percent of shares -- nearly a quarter of BlackBerry.

The filing states (important bit is highlighted):

In light of the Issuer’s recent announcement that its board of directors has formed a Special Committee to explore strategic alternatives to enhance value and increase scale, the Reporting Persons are considering all available options with respect to their holdings of the Shares, including, without limitation, a potential acquisition of all the outstanding Shares of the Issuer that they do not currently own, either by themselves or with other interested investors (an “Acquisition”).

The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may from time to time and at any time in the future, depending on various factors, including, without limitation, the outcome of any discussions referenced above, the Issuer’s financial position and strategic direction, actions taken by the board of directors, price levels of the Shares, the availability of debt and equity financing for any such Acquisition or other transaction, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, take such actions with respect to their investment in the Issuer as they deem appropriate at the time given the current facts, circumstances and conditions before them. Such actions may include, but are not limited to: (i) acquiring additional Shares and/or other equity, debt, notes, other securities, including but not limited to derivative or other instruments that are based upon or relate to the value of the Shares or the Issuer (collectively, “Securities”) in the open market or otherwise; (ii) disposing of any or all of their Securities in the open market or otherwise; (iii) submitting bids, proposals, indications of interest, and/or formal offers to the Special Committee, management or advisors of the Issuer for their review and consideration; (iv) negotiating with such persons and/or their legal and financial representatives regarding the potential terms of any such Acquisition or other transactions; (v) discussing the various potential alternatives and strategies regarding the Issuer with others, including but not limited to interested market and industry participants; (vi) entering into agreements or understandings with other shareholders of the Issuer with respect to the voting, holding and/or.

In other words Doug Fregin and Mike Lazaridis -- like Mr. Watsa -- want to take BB private with or without the help of other investors and other current shareholders.  The question for BB fans is what such a maneuver might mean for BB's hopes of surviving as a phonemaker.

III. Could Sale to Co-founders Prevent a Breakup of BB?

On the one handing the keys to Mr. Lazaridis, who was essentially fired for steering his company downhill, seems very ill advised on the surface.  Mr. Lazaridis hasn't spent long away from BB after retiring in 2012 from his roles as vice-chairman and director, which he had retained after being booted from the co-CEO and co-chairman spots.

Jim Balsillie and Mike Lazaridis
Mike Lazaridis (right) is part of the less-than-dynamic duo who got BB/RIM in trouble in the first place.
[Image Source: Globe and Mail]
 

In retrospect one somewhat troubling quote reflecting on Mr. Lazaridis' leadership comes from a 2009 Fortune interview in which he said, "Sometimes we have to put the brakes on.  We've shown that we can handle annual 100% growth. I'm not sure we could handle more than that."

Mr. Lazaridis will also long be remembered for his embarassing decision to storm off the set of a BBC News interview in 2011 over questions about his company's reportedly growing security problems.


Mr. Lazaridis was also criticized for spending 75 percent of his time on personal projects outside of BB.  It is unclear if the accusation was true, but if so it was for a good cause at least -- Mr. Lazaridis had been volunteering his time and a $50M USD charitable donation to help set up the Perimeter Institute for Theoretical Physics in Waterloo, Ontario, the city where RIM is based.

RIMdenberg
Lazaridis is accused of fiddling (around) while the RIMdenberg burned.
[Image Source: Jason Mick/DailyTech LLC]

On the other hand, the purchase might in some ways be good news for BB device fans, as Mr. Lazaridis and Mr. Fregin seem much less likely to split the company up and auction its assets then Prem Watsa. Mr. Watsa had said he doesn't intend to break up BB, but then he went back on that somewhat in a recent interview saying he was open to getting out of the hardware business.

And it's hard to say anything significantly bad about Mr. Fregin's time at BB/RIM; he served as Operations VP during BB's primary growth years in the early 2000s, but he retired in a year prior to its biggest success in 2008, and subsequent decline.

Of course it's possible that Mr. Watsa, Mr. Fregin, and Mr. Lazaridis could even all team up with Mr. Watsa, if he is willing to take on partners (as the cofounders are) and if their vision for BB's future is similar.

One final interesting note is that if Mr. Lazaridis does gain control of BB it may ditch its all touch devices, like the Z10.  After seeing disappointing sales of its Storm/Storm 2 models, and subsequent all-touch devices, Mr. Lazaridis reportedly urged CEO Thorsten Heins to ditch the Z10 and plans to launch all-touch BB10 phones before he stepped down from his spot on the board of directors.


Blackberry Z10

Mr. Lazaridis's opposition to touch devices may trouble some, who feel that the whole pointing in going to the more graphically rich BB10 is to be able to deliver a solid experience on high-resolution full-touch devices.  Indeed many of BB10's features would suggest that.  However, sales back Mr. Lazaridis's view; the Z10 was a terrible flop.

Source: SEC [form]





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